Swimming in Sugar
?? Fundamentals
The Sugar supply glut enters its third year, as world demand drops to 4-year lows. Brazil and Australia are also expected to have banner crop years, adding to already overwhelming supplies. Sugar has been unable to benefit from the high price of Corn due to anemic demand for the sweetener. Mexico indicated that it will not need to import Sugar, with the government stating that domestic supplies should be able to satisfy demand.
India’s food minister had indicated that the country will allow exports of Sugar due to a domestic excess. China, the second largest user of the sweetener behind India, is expected to allow no more than 1 million tons of Sugar to enter the country annually until 2015. Brazilian producers could shift gears and switch to ethanol production due to the low price of Sugar.
?? Technical Notes
Turning to the chart, we see that March Sugar prices pulled back sharply after late September/early October. The RSI is close to oversold levels due to the recent selling pressure, which may support prices in the near-term. Recent lows have hung around the 20.00 level, which is both technical and psychological support. Failure to hold 20.00 suggests that prices could come down to test the 17.00-18.00 area. On the upside, prices would need to cross above 25.00 to recapture upward momentum, which would be a monumental task at this point.
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